Pierre-Olivier Gourinchas, the chief economist of the IMF, warns on Tuesday that few countries will emerge unscathed economically from the war in the Middle East, expecting slower global growth and higher inflation this year.
Due to the conflict triggered by Israeli-American bombings on Iran starting on February 28, the IMF based in Washington has significantly revised its projections.
“Before the war, we were preparing to raise our growth forecasts,” described IMF Chief Economist Pierre-Olivier Gourinchas to AFP.
Instead, the forecasts have been reduced.
“Our reference forecasts are based on a relatively short conflict with temporary energy market disruption that disappears next year,” explained Mr. Gourinchas.
In these conditions, global growth could be limited to 3.1%, down from the organization’s previous 3.3% projection in January.
In case of a prolonged war, the IMF’s worst-case scenario predicts a growth rate of 2%, which is low – and rare – on a global scale.
If the energy shock is the biggest in history, its impact on the economy is less than that during the 1970s oil crisis, mainly because “the economy is much less dependent on oil today than back then,” Mr. Gourinchas pointed out in a press conference.
The United States is expected to be among the least affected economically by the conflict, with growth projected at 2.3% in 2026, 0.1 point lower than the previous estimate in January.
Due to the surge in oil prices, the IMF has also raised its inflation forecasts, which had been slowing before.
– Emerging economies resilient –
The impact of the conflict, both in terms of growth loss and price increase, is unevenly distributed worldwide.
In terms of growth, the Middle East, North Africa, and Central Asia region are most affected by the war’s effects, with growth cut in half.
Saudi Arabia, the main economy in the region, sees its growth revised to 3.1% for this year, 1.4 points lower than the previous estimation.
“The major reason is, of course, the fact that they are currently in conflict, leading to a significant downward revision and even a contraction of their GDP for some of them,” emphasized the IMF’s chief economist.
Conversely, the impact should be minimal, if not nonexistent, for major emerging countries, with China losing only 0.1% growth this year at 4.4%, India seeing a 0.1% growth increase to 6.5%, and Brazil a 0.3% increase to 1.9%.
Another potential winner is Russia, with growth expected to reach 1.1% this year, up from 0.8% in the previous estimate in January.
Among advanced economies, besides minimal impact for the United States, Japan and Canada seem to resist better than Europe.
The United Kingdom is the most affected among advanced economies, with a 0.5-point revision compared to the January estimate and expected growth of 0.8%.
The eurozone, on the other hand, sees its growth revised downward by 0.2 points to 1.1%, with varying impacts among its member countries.
France is less affected than its Italian and German neighbors, with a 0.1-point decrease in growth forecasts to 0.9%.
